European markets mixed after recent gains

European markets are closed and following Tuesday's gains, there has been a bit of a pause for breath. Investors have turned a little cautious ahead of Thursday's meetings of the Bank of England and European Central Bank, and Friday's US non-farm payroll figures. So here's the scores on the doors:

Dow hits another new peak in early trading

Following the positive US jobs numbers earlier, the Dow Jones Industrial Average has got off to a strong start in early trading which means, yes, it's at another new peak, hitting 14,320.

This rise comes amid hopes of further central bank stimulus despite - or because of - the disagreements over the current US spending cuts. Christopher Vecchio at DailyFX said:

On the surface, political tension is ominous; we’ve seen over the past several years what division in Europe and the US can do to investors’ sense of security.

This time, however, political division in the US might be forcing the Federal Reserve’s hand in keeping interest rates low as the economy struggles with balancing growth (a strengthening US consumer) and austerity (higher taxes and lower government spending).

In a sense, then, the political gridlock embracing the world’s largest economy is a bullish catalyst, because it means the Fed will need to continue its expansive quantitative easing policies.

Canada keeps rates on hold

Over to Canada, where the central bank kept its interest rates on hold at 1% and seemed to hint at a further delay in any increase.

The bank, whose governor Mark Carney is set to take over at the Bank of England from Sir Mervyn King, has been signalling for some months the next move would be upwards. In January it said a move was "less imminent" and now it talked of keeping rates on hold "for a period of time." Its statement said:

With continued slack in the Canadian economy, the muted outlook for inflation, and the more constructive evolution of imbalances in the household sector, the considerable monetary policy stimulus currently in place will likely remain appropriate for a period of time, after which some modest withdrawal will likely be required, consistent with achieving the 2% inflation target.

Greek students protest in Athens

Photograph: ARIS MESSINIS/AFP/Getty Images

In Athens, university students have been demonstrating outside the parliament in protest at plans to overhaul the Greek university system.

It's the latest in a string of protests against cuts to the Greek education system. This includes merging or shutting down 384 departments and faculties across Greece's universities and technical colleges. Some institutions are expected to close altogether.

Teachers say will cause deep, permanent damage to standards in the sector

The government, though, has argued that it is vital to make cutbacks to save funds.

Here are some photo's from today - a reminder that anger over austerity cutbacks has not diminished.

The Democratic Party meeting is continuing in Italy today. Eurasia Group's Wolf Piccoli flags up that former Italian PM Massimo D'Alema has spoken, and given some limited backing to Pier Luigi Bersani.

Lizzy Davies on Bersani's big speech

Bersani insisted once again that it was the PD's responsibility to try to form a government, he outlined an eight-point "programme of essentials" which ranged from a conflict of interest law to measures to get Italy "out of the cage of austerity".

Many of these run along the same lines as the M5S, but Bersani took the opportunity to deny he was "courting" Beppe Grillo but merely trying to understand what had led to its success.

He ruled out- again- any cooperation with Berlusconi's centre-right, but said the PD was open to discussion with other parties, in particular with Mario Monti's Scelta Civica.

But he reiterated that the ball was in the PD's court. "The other parties cannot offer something better in terms of governability; they have neither the intentions nor the numbers," he said, according to the Ansa news agency. "Apart from some ideas to block our path, they don't have anything to say to the country."

Poor Bersani, though. Although this was his big speech, many eyes are on another man in the room: Matteo Renzi, the young mayor of Florence who fought against him in the leadership primaries last year. Renzi, who met with Monti yesterday at Palazzo Chigi, is, for the moment, rejecting any suggestion that he could seize this inglorious moment in the party's history to make his move.

That doesn't, of course, stop commentators from speculating furiously. It will be very interesting to see what he says later.

Mervyn King: It's time to come clean about RBS

Meanwhile, Sir Mervyn King has dropped a bombshell on the UK banking sector by calling for a radical shakeup of the way Royal Bank of Scotland is being managed.

King said that RBS needed to admit the true scale of the bad loans on its balance sheet.

He argued that RBS's failure to write down bad loans was holding the company back, and the wider economy. He wasn't directly critical of chief executive Stephen Hester, but insisted that a different approach was needed.

The governor told the Banking Standards commission that the losses on RBS's balance sheet don't go away simply because they haven't been recognised yet

As he put it:

This has dragged on unnecessarily long....

I would certainly be prepared to lend my support to those who would argue that it is better to recognise [the situation and restructure RBS].

King added that the Treasury should not worry about the effect of the plan, on the public finances (more public money would probably be pumped into the bank to cover the 'new' losses).

Lord Lawson, the former UK chancellor, said King's proposal was "very important indeed", and could give a much-needed boost to small business lending in Britain.

It's a pretty jaw-dropping intervention from the governor, two weeks before the next UK budget.

Bersani's eight-point plan for a government of change

Important developments at the Democratic Party meeting. Pier Luigi Bersani has unveiled the eight-point plan which he hopes to base a government around.

Bersani also ruled out a grand coalition with Silvio Berlusconi's centre-right alliance.

Instead, he pledged to propose a 'government for change' based around an "essential programme".

The first challenge is to break out of the 'cage of austerity' created by Europe's policy of fiscal consolidation. The first priority must be to help the real economy - only then should Italy turn to deficit and debt reduction, he says.

The remaining points are:

2) Measures to tackle the social emergency in Italy

3) Reform of its political system;

4) New measures on equity & justice

5) New rules on conflict of interests;

6) Green economy & sustainable development

7) Working on legislation on citizenship rights for migrants & civil partnerships;

8) Improve education, and research & development

Bersani also argues that Italy could play a key role in changing Europe's economic policies.

King: bank bonus caps are a distraction

Sir Mervyn King also weighs in on bank bonuses caps, arguing that the measures will be neither as effective as supporters claim, or as devastating as critics argue either.

They will, though, be a distraction at a time when there are bigger issues to solve.

King remains critical of the sector, though, saying banks have "lobbied intensively" on the leverage ratios they are allowed to run, in an attempt to maximise the return on their investments and thus the size of the bonuses.

Bailey argues that it is mistake to peg bonuses at 100% of annual salaries, because it will undermine efforts to keep bankers on the straight and narrow (as basic salaries may rise to compensate them).

Fixed remuneration is cash out of the door -- it's much harder to get something back from someone once it's paid to them.

Bailey argues that there has been real progress over bonuses in recent years, pointing out that bonus pools have shrunk recently because of fines imposed on banks (eg RBS following its Libor fine). Bonuses have also been clawed back in the cases of malice, he adds.

Bottom line: until Britain has fixed its 'too big to fail' problem, Bailey doesn't want the bonus structure shaken up in the way the EU has agreed.

(speaking of bonuses, reader zippyp flags up an article arguing that the media got rather too excited about the EU bonus battle yesterday.

What might happen this morning

The party will back Bersani’s line to have a go at trying get the backing of parliament. As the largest coalition in both houses, procedure-wise, this is the right thing to do.

[however this is likely to fail as M5S has reiterated multiple times it will not provide a confidence vote].

As a plan B, while Bersani’s current approach seems to point to an immediate election as the only alternative to working with the M5S, the PD (Democratic Party) directive is likely to budge from this “Grillo or Bust” approach and open up to a greater flexibility towards alternative options (such as backing PMs/governments proposed by the president).

And if PD did support a technocratic government, it's possible that fresh elections could be put off for a year or so.

Bersani to outline plan to form next Italian government

After yesterday's focus on bankers bonuses, we're back in the world of Italian politics this morning. Pier Luigi Bersani, the centre-left leader, will address senior members of his Democratic Left party shortly to outline how plans to form a government.

Having failed to win control of the Italian Senate, but holding a majority of seats in the lower house, Bersani still believes he can take power. But with the radical Five Star Movement (M5S) sticking to its guns and refusing to join Bersani or his rightwing rival Silvio Berlusconi in a coalition, it's still unclear how the deadlock will be broken.

The key could be to design a legislative programme, and a new cabinet, that sufficient M5S's senators are prepared to support.

Bersani is due to address about 100 members of the party’s top internal body at 10.00 am in Rome, or 9am GMT.

The meeting comes as speculation swirls that an unelected prime minister could be the answer. President Georgio Napolitano is reportedly considering installing a second technocratic PM to succeed Mario Monti.

As one government official told Reuters last night:

Napolitano wants a government with the broadest possible support that will last as long as possible.

We'll be tracking Bersani's meeting, and other key events across the eurozone and beyond.

That will include Sir Mervyn King's appearance before the banking standards committee of parliament this morning (from 9.45am). The outgoing Bank of England governor will give his view on the financial sector, following the Libor scandal.